Gujarat PSUs gave undue benefits to business houses: CAG

Gandhinagar: The Comptroller and Auditor General (CAG) has said government-owned firms in Gujarat granted "undue benefit" to big industrial houses, which resulted in revenue losses worth crores of rupees to the state exchequer.

The CAG report, for the year ended March 31, 2012, was tabled today in the Gujarat State Assembly.

It also highlighted that the state government has tweaked rules to grant land to Ford India Pvt Ltd as well as Larson and Toubro Ltd.

"Gujarat State Petronet Ltd (GSPL) was responsible for deviating from the agreed terms of recovery of gas transportation charges from the specified entry point of the company`s pipeline network and this led to passing of undue benefit of Rs 52.27 crore to RIL," the CAG report said.

CAG was of the view that GSPL has failed to safeguard its own interest, leading to passing on undue benefit of Rs 52.27 crore to RIL.

GSPL had entered into a gas transportation agreement (GTA) with RIL transport D6 gas from Bhadbhut in Bharuch district to RIL`s refinery in Jamnagar in March, 2007.

However, when RIL began transporting gas from its KG-D6 field to its refinery, GSPL did not invoke GTA terms and instead charged RIL a single rate on the quantity transported, thereby passing of undue benefit of Rs 52.27 crore to RIL.

Similarly, it has also highlighted that Gujarat Urja Vikas Nigam Ltd (GUVNL) was involved in non-adherence to terms of the power purchase agreement (PPA), which led to short recovery of penalty of Rs 160.26 crore and passing of undue benefit to Adani Power Ltd (APL).

On the other hand, the CAG report observed that GUVNL recovered a penalty of only Rs 79.82 crore from APL for its failure to supply power and also for the short supply of power against GUVNL`s entitlement in the power generated by APL during August 2009 to January 2012.

CAG also took strong exceptions to the Gujarat government regularising alleged encroachment of 7,24,897 sq mts of land by Essar Steel Company Ltd (ESCL) at Hazira in Surat, at the same price as government alloted land to L&T near ESCL, which resulted in short recovery of ad hoc occupancy price to the extent of Rs 238.50 crore.

"Government land measuring 7,24,897 square metres was encroached by ESCL in Hazira, Surat district. On request of the company, the government decided in July 2009, to regularise the encroachment by levy of 2.5 times of ad hoc value of land at Rs 700 per square metre, on the ground that, the land in a nearby area was given to L&T," the CAG report said.

"We noticed that Rs 700 per square metre considered by the government for working out the ad hoc value was not justifiable," the CAG report said.

"When pointed out, the government replied in June 2012, that as the company was incurring loss of Rs 200 crore per day, due to delay in completion of the project, an ad hoc price of Rs 700 per square metre was fixed," it said.

In its report, CAG also alleged "playing around rules" by the state government to grant land to Ford and L&T at concessional rates.

As per the report, the state government had allotted around 460 acres (18,63,687 square feet) of land valued at Rs 205 crore to Ford India Pvt Ltd "for the purpose of establishment of a mega project of automobile and engineering for manufacture of automobiles at the rate of Rs 1,100 per square feet, fixed by the State Level Approval Committee (SLAC)".

It observed that the SLAC had not been empowered to fix the rate of land for allotment to mega projects (above Rs 1,000 crore investment).

After the discrepancy was pointed out, the government replied that the SLAC had decided the value of land based on some concrete facts, which is an SLAC practice and the price was also approved by the Cabinet.

The CAG said that the reply from the government is not acceptable, since SLAC is not empowered to do valuation of land.

It also recommended that the state government follow a uniform policy for allotment of government land to safeguard its revenue and public interest at large.

CAG also highlighted the case of allotment of land to L&T measuring 8,53,247 square metres at Hazira, Surat for setting up facilities for manufacture of super critical steam generators and a forging shop for a nuclear power plant.

A District Level Valuation Committee (DLVC) had recommended the rate as Rs 1,000 to 1,050 per sq mt.

As the value of the land exceeded Rs 50 lakh, the revenue department sent the case to the SLVC for valuation. The SLVC recommended the rate at Rs 2,020 in September 2007 and the revenue department forwarded the proposal to the state Cabinet, prescribing the same rate.
CAG noted that the cabinet, in February 2008, granted a special concession of 30 per cent on the value of land fixed by the DLVC and allotted the land at Rs 700 to Rs 735 per square metre, as it considered the project "high tech" and "of national importance" as well as the first of its kind in Gujarat.
"It was seen from the above that the concession was granted on the price of land recommended by the DLVC. Thus, non-adoption of the value of land fixed by SLVC, resulted in loss of revenue of Rs 60.66 crore even after granting 30 per cent concession on the final value of land fixed by SLVC. The percentage of concession worked out to 65.20 per cent on price fixed by SLVC," the CAG report said.